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Big tech earnings determine the market

Big tech earnings determine the market

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It was a bit of a mixed day for big tech – with the two cornerstones of the digital world, Microsoft (MSFT, $251,90) and Alphabet (GOOGL, $105,02) announcing their earnings reports. 

Microsoft posted the fourth quarter of its 2022 financial results on Tuesday reporting revenue of $51.9 billion and a net income of $16.7 billion. Revenue came in at $51.9bn (£43.1bn), which was up 12% from last year., and net income increased by just 2%. While revenue was up, Microsoft saw some of its core businesses, including Windows and Xbox, start to slip. Analysts had been forecasting $2.29 per share and revenue of $52.94bn (£44bn), according to FactSet. Microsoft blamed "evolving macroeconomic conditions and other unforeseen items" for its financial performance. It cited supply challenges in China due to strict COVID-19 lockdowns, a deteriorating personal computer market, and the winding down of its operation in Russia as a reaction to that country's invasion of Ukraine.

Alphabet, meanwhile, had a more positive showing, with revenue nearly in line with analysts' expectations. Alphabet reported second-quarter revenue of $69.69bn, 13% higher than same period a year ago and nearly in line with the average expectation of $69.88bn among investment researchers tracked by Refinitiv. The news heartened Wall Street, with shares up 3% after hours. Overall profit was $16bn (£13.3bn) – or $1.21 per share, below the average estimate of $1.29. Currency fluctuations from a strengthening dollar knocked 3.7 percentage points off revenue growth, CFO Ruth Poratt said the strength of the dollar will hit next quarter’s results even harder.

Why it matters

Results gave investors hope that Alphabet’s search and advertising business might be able to withstand big countries potentially going into recession over the next year however the company is still cautious about global headwinds and has excercised a hiring freeze. While for Microsoft the company is leaning into a softening PC market with the tech giant affected by the ongoing chip shortage and issues in China. However its cloud business is going from strength to strength.


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